Definition of Alligator spread:
In futures and options trading, that difference between the buying and selling prices of commodities or contracts which generates so much commission for the broker that it will eat the investor alive..
An alligator spread is an investment position that is destined to be unprofitable because of the onerous fees and transaction costs associated with it. The term is often used in relation to the options market, where investors sometimes combine put and call options to form complicated positions.
If the fees from these transactions become too large, the investor might lose money on the transaction, even if the market moves in an otherwise profitable direction.
How to use Alligator spread in a sentence?
- An alligator spread is an investment position that cannot be profitable, because of its fees.
- Although unscrupulous brokers might sometimes sell investors on alligator spread positions, these situations more commonly arise by accident. To avoid them, investors must carefully review all the fees associated with their positions.
- The term is often used in options trading, where complex trading strategies can involve high costs.
Meaning of Alligator spread & Alligator spread Definition